European Commission President Ursula von der Leyen backed the recent EU trade deal with the United States. She said the deal offers stability and helps avoid a damaging trade war. Von der Leyen explained that a conflict with the U.S. could have benefitted Russia and China, while hurting European workers, consumers, and industries. She acknowledged that the agreement has its flaws but highlighted its 15% “all-inclusive” tariff structure. This structure gives European companies better access to the U.S. market compared to other partners. The deal was made with President Trump last month in Scotland and has drawn criticism from lawmakers and industry groups in Europe, though both sides are working to finalize it.

Reduced U.S. Tariffs on European Cars

The agreement includes lower U.S. tariffs on European cars, which may lead to discounts on steel and aluminum as well. However, EU officials are still pushing for tariff reductions on wine and spirits, which were not included. German Chancellor Friedrich Merz also backed the deal, noting that while tariffs will affect Germany’s economy, this outcome is better than entering a full trade war. With the threat of a major trade conflict with the U.S. now diminished, we should expect market volatility to decrease. Europe’s VSTOXX volatility index has dropped below 15, a notable reduction since the deal was announced last month. This calmness is a result of avoiding the market turmoil seen during the trade disputes of 2018-2019. European automakers are the biggest winners from this deal, and related investments should be adjusted accordingly. Since the July announcement, shares in companies like Volkswagen and BMW have risen over 8%, as the U.S. market is crucial for their high-margin sales. It seems wise to take bullish positions through call options or futures on the German DAX index, which includes many auto stocks. For steel and aluminum producers, the outlook is more uncertain, creating opportunities in options pricing. The deal mentions only a *possibility* of future tariff discounts, not a certainty. Implied volatility for options on stocks like ArcelorMittal remains high, indicating that traders should prepare for potential price changes if more details on metal tariffs come out.

Impact on Wine and Spirits

However, we should be cautious about sectors excluded from the agreement, particularly wine and spirits. Major French beverage companies have underperformed compared to the wider market in August 2025, and they continue to face existing U.S. tariffs. Using put options to hedge or take bearish positions on these companies could help protect against further losses. This new trade stability is also strengthening the euro against the dollar. The EUR/USD exchange rate has increased from around 1.08 to 1.11 in the past month as fears of economic conflict have eased. We can expect this trend to keep going as long as the deal remains in place, making long euro positions appealing. It’s important to remember that the deal is still being formalized and is facing criticism. Any news about delays or opposition from European lawmakers could quickly shift these trends. Therefore, keeping some protective put options on broad market indices like the Euro Stoxx 50 is a smart way to guard against political risks in the coming weeks. Create your live VT Markets account and start trading now.

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